Moneyball without the ball

Precision Therapeutics – Buying into the Sales Ramp

by Lsigurd on February 9, 2018

Precision Therapeutics (AIPT) is roughly a $12 million dollar market cap company. They have 11 million shares outstanding and no debt. After a January share and warrant capital raise (which I am including in my share count) they should have about $4 million of cash on hand. They also have a $1 million note receivable from joint venture partner Cytobioscience.

The recent share and warrant raise diluted shareholders significantly. The placement was for 2.9 million units, consisting of shares at $0.95 and 0.3 warrants prices at $1 per share. This was a $1.50 stock as recently as November.

Precision raised the cash because they are burning cash. I estimate cash burn per quarter is about $1 million per quarter. This will probably continue.

Those are the facts, most of them not pretty. So why did I take a position?

The STREAMWAY System

Precision markets a medical fluid waste disposal system called the Streamway System. The system is a wall mounted device located in the operating room. During procedures surgical waste fluid is continuously removed via suction, passed through proprietary filters, measured and recorded, and then passed directly into the building’s sanitary sewer.

This is very different than traditional waste handling during procedures. Competitive solutions use mobile carts and disposable cannisters that have to be replaced, often multiple times during the procedure, and in many cases treated with gels to minimize the chance of contamination. Even so, accidents occur and they are expensive. Hospitals spend $4,500 on average for a mishap.

Here is a look at Streamway (Skyline is the former name of Precision) and its competition:

The Streamway system has a number of advantages over incumbent waste disposal options:

Price: Cost of the unit is similar to slightly less than competition (Stryker system plus docking station costs $34,000 though I suspect they have been discounting to try to squeeze Streamway), but the disposable cost is 1/2 to 1/8 of the cost of replacing cannisters

Safety: no chance to spill fluid or to have an accidental catheter removal during a cannister change

Labour: cannisters have to be changed during a procedure anywhere between 2-10 times. This is entirely eliminated with Streamway

Accuracy: can more accurately estimate volume extraction than the manual estimation using cannisters

Ease of use: removal of clumsy cannisters, latching, and replaces with simple instrument panel with instructions

Time: Procedures do not have to be stopped to replace cannisters which can result into 20-50% faster surgery

The primary negative with Streamway is installation. It has to be hooked up to the sewage line and therefore the operating room needs to be shut down and the wall cut open to complete the install. This has been a sticking point, particularly as hospitals are not unhappy with the mobile carts they’ve been using. Precision has taken to emphasizing the improved safety of using Streamway.

The cost advantage of Streamway is significant. This is from the last 10-K:

A study by the Lewin Group, prepared for the Health Industry Group Purchasing Association in April 2007, reports that infectious fluid waste accounts for more than 75% of U.S. hospitals biohazard disposal costs. The study also includes findings from a bulletin published by the University of Minnesota’s Technical Assistance Program. “A vacuum system that uses reusable canisters or empties directly into the sanitary sewer can help a facility cut its infectious waste volume, and save money on labor, disposal and canister purchase costs.” The Minnesota’s Technical Assistance Program bulletin also estimated that, in a typical hospital, “. . . $75,000 would be saved annually in suction canister purchase, management and disposal cost if a canister-free vacuum system was installed.”

A second study, by the Tucson Medical Center, found similarly significant savings. They estimated they would save $22,000 per year in a single operating room. Bottle costs for the mobile unit they had installed previously were $107 per procedure. The Streamway disposable cost brings that down to $24 per procedure.

In general, the $24 price tag is a favorable disposable expense compared to the costs of replacing cannisters, waste disposal, gel costs and labor for the competing Stryker and Zimmer systems. Those systems need to have cannisters replace anywhere between 2-10 times depending on the procedure. The material and waste disposal costs can be between $25 – $100 (or more) and on top of that there are labor costs and the time cost of having to pause the procedure to empty the cannister. You add to that the risk of a contamination event (which is going to be a $4,500 hit) and its easy to see how Streamway saves money.

Struggling Sales

So you can make the argument that Streamway is a superior system. Nevertheless the company has had a horrible time ramping sales. On the third quarter conference call the CEO Carl Schwartz, came clean about what had been happening:

When I took over as CEO in 2016 like many of you I thought the Streamway System was a slam dunk…Nothing could have been further from the truth. We had two very entrenched competitors, Stryker and Zimmer, who have their units at most hospital facilities in the country. In addition they were able to bundle their units in with other operating equipment, offering substantial discounts. Furthermore, it became increasingly evident that many institutional hospital customers would not allow us to connect to the hospital sewer system because they did not want us to open the operating room wall. Given these challenges and the fact that their unit and ours effectively removed fluids, what was our competitive advantage? After several months of effort we discovered that our most competitive advantage was our ability to avoid the spread of infection in the hospital by eliminating any contact between the infectious materials and the patients and staff and we have been hammering that home where ever we present the Streamway system and in newspaper articles all over the country. As you know it has been a slow going but we are making substantial progress.

In addition to pressure from the competition in the United States, the company has been slow getting regulatory approval in non-US districts. Up until this year their sales staff and list of distributors was sparse. It was a situation where you had a solid, superior product, but it was competing against well-funded incumbents, and marketing and sales dollars were not enough to mount an offensive.

In fact it seems like management had begun to give up themselves. There was a failed merger with Cytobioscience in the summer. There was a subsequent joint venture with Helomics and a proposed one with Cytobioscience. Indeed even the strategy for 2018 includes the following statement:

To expand Skyline’s business to take advantage of emerging areas of the dynamic healthcare market. To this end, management is implementing a Merger & Acquisition strategy focused on finding and acquiring high-growth companies that have established operations and the ability to drive both revenue and capital appreciation for the Company, or entering into strategic relationships with these companies.

Even if management was just being strategic with its new diversification approach, investors were frustrated. Listening to conference calls in 2017 is a painful exercise. Lots of frustrated investors, many of them long time investors, having been expecting a steep sales ramp, saw unit sales trickle in a 1 or 2 a quarter and the share price lag.

With cash levels dwindling, management had to raise capital with the dilutive raise I mentioned previously. That, along with the failed Cytobioscience merger, was likely the last straw for many investors.

As a consequence, the share price hasn’t done well. The one year chart illustrates the disappointment:

Things are turning

I’ve had Precision Therapeutics on my watchlist for the last 6 months. I can’t remember why I added it, I’m pretty sure it was mentioned by someone on twitter though I don’t remember who. When I looked at it a number of months ago I thought they had an interesting product but there was no indication that they were gaining any sales traction. So I passed.

However that appears to be changing. In early January the company announced that they had sold 5 Streamway systems in the fourth quarter. They sold another 6 systems in January alone. I wish I had been paying a bit closer attention to the company when this news release came out, as I would have probably started buying it back then.

I did pay attention to the second news release that came out last week. Precision projected 100 systems sold in 2018 from the United States alone. I caught the stock soon after it jumped on the news.

Precision sold 10 systems in 2017. This includes at least 1 system sold in Canada. So the projection for 2018 is for at least 10x 2017 sales.

While up until now sales have drifted aimlessly, the company has been doing a lot of work behind the scenes that has set themselves up for this type of increase. They have:

Hired 4 regional sales managers and a VP sales in early 2017. Up until the end of 2017 they had a single regional sales manager and no VP Sales.

Signed a contract with Vizient, which is a healthcare improvement company with a $100 billion in purchasing volume, in the summer

Partnered with Intalere, a health care supply chain manager

Signed a 3 year agreement with Alliant Health, a Service-Disabled Veteran-Owned Small Business that sells medical device products to the federal government, to sell STREAMWAY to into Federal Hospitals

And while early sales have been sporadic, they do mark first steps toward greater penetration, opening up the opportunity for more significant deployment once the systems benefits are experienced. Take for example, the two units sold in the third quarter. Both sales were to single operating rooms across much larger hospital networks, in one case a 6 facility network and in the other a 11 facility network. On the third quarter call Schwartz said they were in discussions to standardize waste management across each network.

Foreshadowing the increase in sales, Precision did 92 demos in the first three quarters and equaled that amount in the fourth quarter alone. They did 145 quotes in the first 3 quarters, and more than 75 in the fourth quarter.

International sales have been even slower to come then domestic, but in the last 6 months Precision has made some strides there as well. In June they got the CE mark for the system, which allows them to start selling the devices into Europe. Later in the year they partnered with Device Technologies, which will be selling Streamway in Australia, New Zealand, Fiji and the Pacific Islands (they seemed quite excited about the Australia opportunity on their third quarter conference call). They added a distributor in Canada as well as have been selling systems directly. They added another distributor selling into Switzerland in November and opened a European office a few days ago. Its worth pointing out that the 100 unit sales projection is not including any sales outside of North America.

One time and Recurring Revenue

Streamway systems retail for about $24,000 per unit. 100 units should equate to around $2.4 million in revenue.

That will be a big uptick from 2017 revenue. The company has been printing quarterly sales in the $100,000-$150,000 range for the last few years, so the 5 Streamway units sold in the fourth quarter and the 6 and January should provide a nice revenue ramp.

However maybe the more important consideration is that as more Streamways are installed into operating rooms, recurring revenue will scale as well.

Precision generates recurring revenue from the sales of disposable filters and cleaning fluid. According to the 10-K, the filter and fluid retail for $24. The company recommends changing the filter and cleaning the unit (with the fluid) after every procedure.

I think hospitals are doing this more like every 2-3 days. Nevertheless, Precision has been generating about $100,000 of revenue per quarter from the sales of the disposables. Given that there is about 100 units currently in operation, it works out to $1,000 of revenue /unit/quarter. While the company doesn’t provide margins from disposables, its pretty easy to estimate them. In the second quarter no Streamway units were sold, and the company generated $106,000 at 80% gross margins.

It looks like the average operating room performs 2-3 surgeries per day. If hospitals actually used the disposables after every surgery, I estimate revenue would be more like $4,300 to $6,500 per quarter per unit sold, or over 4-6x what I estimate it is now. That’s a lot of reason to promote proper usage.

Even at the current disposable usage rate, 100 extra units means $400,000 more high margin recurring revenue annually. Add that to existing consumable revenue, and add on the $2.4 million from unit sales, and I get annual revenue of about $3.2 million for 2018.

CRO Joint Ventures

Probably because Streamway sales have been slow, management has looked to alternative lines of business to boost interest in the stock. The initiatives kicked off in the summer with an announced merger with Cytobioscience, a contract research organization (CRO) that specializes in testing the cardiac safety of drug compounds. The merger was subsequently postponed in favor of a joint venture in November, and at the same time a second joint venture was announced with Helomics, another CRO company.

As it stands now, Precision has a 25% ownership stake in Helomics and a $1 million loan to Cytobioscience. The joint venture with Cytobioscience was supposed to close by year end but I haven’t seen anything to that effect. Listening to the last conference, it seems like even the merger with Cytobioscience may take place once audits and accounting work are completed (it was suggested that the merger didn’t transpire because of auditing required on Cytobioscience before it could be merged with a public company). On the other hand this article, which I can’t read in its entirety, says that Cytobioscience walked away from the merger, so who really knows.

I don’t know what to make of these two joint ventures and the move into CRO. It seems like the CRO business is growing. Whether these companies are at the forefront is anyone’s guess. Cytobioscience said on the second quarter call that they expected $700,000 of revenue a month by the first quarter of 2018. Helomics, which specializes in customizing cancer treatment based on finding patterns with their patient database, is in a growing field.

I’m also not entirely sure why these companies want to merge with Precision. The Streamway doesn’t really have a strong connection to the CRO businesses that they operate from what I can tell. Precision does have net operating losses of $11 million that could be utilized against future profits. So maybe that’s it?

Just last week the Economist dedicated an article (and a cover) to the emerging field of using data to provide better diagnosis and treatment. The article talks about using AI to better customize treatment to patients. That is essentially what Precision will be trying to do in their partnership with Helomics.

Summary

Cash on hand should be enough to get Precision through 2018, and maybe further depending on how these sales develop and how much they end up spending on partnerships. If I ignore cash, the price to sales (P/S) multiple that the company trades at is 3.5x. Including cash its more like 2.5x.

Given the growth (10x the revenue in 2017), the margins (gross margins of 80%), and momentum in engagements across the United States and internationally, this doesn’t seem out of line to me.

The stock is hated by investors because it has disappointed for so long. There is a long list of bashers I’ve seen on twitter and a few on SeekingAlpha. None of these bashers have brought up a point that has concerned me though. They are mostly just rehashing past price declines.

I think the stock moves higher. At the very least it should get back to its November levels, which were above $1.50. If there is evidence that the strengthening of sales of Streamway is sustainable over multiple years though, that should just be the beginning. The recurring nature of the disposable sales adds a lot of value as more systems are installed. Finally, if the Cytobioscience merger becomes a “go” again, that would be another catalyst to the stock.

So you have a beaten down stock, pretty clear indications of sales momentum, and the outside chance that something bigger is announced. All around it seems like a decent bet.

Note: I have been told there is a SeekingAlpha article by Jonathon Verenger on Precision that is quite good. I haven’t read it yet because I wanted to write up my own ideas first without influence.

Mike Arnold wrote something up in SeekingAlpha which is good too. I think 4.5x TTM revenue given that their revenue stream is recurring (like the Light Reading points out its kinda like an unlimited use subscription to the software) is fairly cheap given the growth opp.

With Medicure we will just have to see what they do with the cash and how the new indications ramp. So the EV is about $55mm, they have $4/share in cash, and Aggrastat does about $7-$8mm of EBITDA. Its not expensive but Aggrastate probably doesnt have a big growth profile so they need growth from some of these new indications they are launching to get everyone excited. If the stock sold down to say $6 I would buy more but I doubt it does. It probably just sits here until there is more clarity about growth plans.

Yeah exactly. I keep waffling on whether I should add to MPH. The thing holding me back is the price pressures on Aggrastat and whether in the short run that is more the focus on the market than Prexxartan launch – I mean in all likelihood we dont get significant numbers out of Prexxartan right away whereas another couple $7mm quarters from Aggrastat might not be received that well

I guess I wouldn’t average down, at least not now. I am not sure, how long it will take to ramp up sales for Prexxartan and it will probably only move the share price if they either give good guidance, or have good numbers already. On the other hand, it’s an oral solution (the only one available), which makes it easier to take for patients, to prescribe for doctors and likely increases compliance.
But they also have to pay 0.4M for approval, royalties and milestone payments from net revenues. I don’t like that.

Good question.
First of all it is good that the pipeline is full and near term. Since they are generics approval is probably safe but then they will certainly be no blockbusters. There is also a lot of competition in terms of acute care cardiovascular injectables for example. How much can they gain?
I don’t know to be honest.
I think it really comes down to growing revenues and especially earnings substantially to move the needle in the stock price. This is not exactly an exciting, wildly followed stock. There is 1 article on SA a year ago.

“net loss for the nine months ended September 30, 2017 of $8.0 million which includes a $10.2 million loss from the Apicore business ”
That won’t happen again because they sold it and receive 105M.
They have also paid back all their long term debt with 9.5% interest rate, which makes another 5-6M.

Management seems to be good, also BoD. I mean they were pretty successful at least from 2008 on. But they like to pay themselves richly, the options bug me abit.

Seems like Radcom is pretty much fairly valued? Some of revenues are not recurring as well. If OPEX stays fixed, and they grow 25% in 2019 and 2020 from expected base of $46m in revenue in 2018, they will do about $25-26m in EBIT in 2020. A 20% tax rate and that is $20m. a 20x multiple on that gets me to only 70% upside over several years IF they grow 25% in 2019 and 2020 and if opex stays indeed fixed?

Also 4-5x revenue for a software company does not seem that cheap? And it seems the recurring part of the company is projects and warranty revenue? Since the products part has lower gross margins and is more choppy. In that case the multiple to recurring revenue is much higher? (closer to 10x).

I havent gone through using your numbers but they look right and I don’t disagree with them. My take is if that’s the growth rate in 2019 and 2020 then RDCM has failed, and thus in that scenario the stock is definitely overvalued at current levels.

The growth rate implies $8mm more revenue in 2018, $11mm in 2019, and $14mm in 2019.

With those numbers in mind, I’ve been looking at it like this. We know the win with AT&T has become $18mm and I think should grow incrementally next year. The Verizon foot in the door win was $5mm and I think it fair to say (you can disagree) that Verizon will grow to close the size of AT&T if Radcom is successful in taking over the architecture the same way as they did with AT&T and more of VZ network migrates to 5G.

So I gauge that full wins on Tier 1s should be $15mm to $18mm, and hopefully even more as Radcom expands into adjacent areas.

If thats the case then the growth numbers you are using imply that in 2018 RDCM has integrated VZ and gotten a little more revenue from AT&T or some other smaller deal, then in 2019 essentially converted VZ to a full win, and then in 2020 it gets one more $15mm win. If its into 2020 and RDCM has AT&T, Verizon, and one more win, then something else has gone wrong with the thesis. Either NFV isn’t getting adopted or a competitor has caught up or something.

These negative scenarios are possible. I’m not saying that I think this is a slam dunk. I just dont think that growth rate represents the optimistic angle.

The nice thing about RDCM is b/c of contract size, even if they just get 2 wins instead of 1 per year those growth rates go up substantially. Add 1 $15mm win half way through each of 2018, 2019 and 2020 to the numbers. So that by 2020 they have 4.5 wins worth of revenue, ie. AT&T, VZ, 2 other full wins, and 1 onboarding. Its one win a year, which doesn’t seem like a lot to me. In that case we are at $109mm of revenue in 2020.

All of this incremental revenue, if the LightReading story is right, should be recurring.

My hope is that even that 1 win a year scenario is underestimating the ramp. I am hopeful that once the CSPs start migrating, there will be an onslaught of deals. There are a lot of telcos out there. My real blue sky upside is we see a year with 3 or 4 deals or more. But I am using the word “hope” intentionally. I don’t have evidence this will happen, other than the herd mentality we see occur when a new technology finally goes mainstream.

So the rebuttal you can give to me is – yeah but its been 2 years and all they have is AT&T and a slice of VZ. Thats totally fair. Thats why I sold the stock in the fall. But I’m back in partially b/c of level ($17 has been good support for a while) and partially b/c what I’m reading suggests that while I was too early last year and telcos move like dinosaurs to a new gen, the flow of deals might be about to pick up.

If you like this one, you probably like Yangaroo as well. It has gone up a bit since I last mentioned it here, but still very attractive IMO. Software company trading at 2.5x revenue, 90%+ gross margins, with a competitor in advertising with 85% market share who has been slipping lately. Chairman has bought a ton of shares recently (who is pretty well connected in ad industry). Only trading at about 10x 2018 earnings as well (assuming they don’t grow much further). The award and music revenues are mostly recurring while advertising revenues are per video. Their tech is better than competitor (less downtime and lower cost to operate), and customers are looking to not have to use just one provider. They plan to take 10% of the ad market, which would amount to about $40 million in revenue just for ad side.

Assuming they have a free cash flow loss now around $4.5M CAD and they have a (discounted) selling price around $20K CAD, they need to sell about 225 units per year to reach cash flow breakeven, which would be a key milestone. 100 units per year is significant relative to that, so this is really worth watching.

A small company like this should have been doing OEM deals earlier on in international markets. Sell OEM licenses to South America, Europe, Japan, Australia, and Asia, for example. Each of those licenses might have paid multi-millions up front fixed license fees and provided enough operating revenue to take the stress off liquidity. They need to be more realistic about how small of a company they actually are.

What you describe in terms of reorganization sounds perfect. They are focusing on sales organization, and the fact that this immediately produces such outsized results is very positive.

How big do you think their addressable market is in North America alone?

I tried to answer the addressable market in my other comment. As for units they need to sell, the way I think about it, and I didn’t say this in the post because i think it sounds sensational, but if they do 10x sales this year how many do they do next year? Is this year a total fluke and the growth rate drops to a double digit percent? Or is this an inflection, and maybe next year they do 3x or even 5x. In both cases they blow away cash flow breakeven before you even consider the disposables they start selling. Thats the opportunity here IMO. If this sales number is real and rooted in the realization of a true competitive advantage, then 2019 should be at least close to the same order of magnitude and that gives the stock real home run potential. On the other hand if this year is a fluke then it probably turns into a dud stock.

This basically reads like a capitulation statement on their existing business and says they want to get into contract research. Contract research is a commodity business where they have no competitive advantage. That letter says they are doubling the share count pool so they can dilute further to buy a new company in this new line of business. I think this can only defocus them and it will act as a weight on the share price. You express similar doubts with a different focus in your article.

It’s quite bizarre that they defocus like this when they are starting to ramp sales on their primary product.

Have you found anything that says what is the total addressable market is for this system? They say in one document that 50 million canisters end up in landfills each year. If we knew the average number of canisters per room where they are used, we might have some idea of how many emergency/procedure rooms might be candidates to use these.

Thats true. You should also listen to the Q3 cc. Its even more depressing as they give all the details why they’ve failed to grow sales. Similarly, consider in the name change press release they didn’t even mention Streamway in the main text.

I don’t know specifics on size beyond what they have said in the 10K: We benefit by having our products address both the procedure market of nearly 51.6 million inpatient procedures (CDC, National Hospital Discharge Survey: 2010 table) as well as the hospital operating room market (approximately 40,000 operating rooms).

MD Technology seems to be offering a similar solution (have been for years). I think the main argument here is: There is a market, but until recently, AIPT was not able to serve that market and because they now have their sales team in place, they will be able to ramp quickly. But this begs the question why MD Tech did not ramp in the last years, and if they did, why this would not hurt AIPT’s ramp.

Another thing is the proprietary nature of their product: To what extent can this be copied by the big players. It is stated that its patented, but MD technology has a pretty similar system if you ask me? Why wouldn’t Stryker be able to create a similar system, and push it to customers? (obviously FDA approvals required, but that is a hurdle that they should be able to take)

Sure. I looked at MD Technologies. Here’s what I thought. They have a similar product. Its not truly continuous suction so I would assume that means the procedures have to be interrupted to empty, though I don’t know for how long given that they have some sort of two cannister solution where you switch back and forth. That seems like a benefit of Streamline over the Zimmer and Stryker products. They are very small; their linkedin page says 2-10 employees and revenue looks like its just over $1mm for all their products. They’ve been around since 1992. It looks like their product has been around since at least 2013.

So my question is, what’s the thesis that this is company is significant competition? I mean look how hard it was for for Skyline to get any traction in Streamway. It just doesn’t seem like the issue here has been a competitively similar product. Its trying to get in the door against two very large, well funded and well established competitors, Stryker and Zimmer. Give me some evidence if you think I’m wrong but I don’t think MD’s product is going to be a limiting factor on the growth here.

As for Stryker and Zimmer, maybe its plausible that they develop their own products. It couldn’t be continuous suction b/c thats patented. But it could be like the DM6000 and be almost continuous. So that might happen. But why now? They didn’t jump at this new product before, the only thing that’s changed now is Streamline is showing momentum. If thats the element that’s changed, why not just buy Precision, or at least the Streamway segment? Zimmer and Stryker are competing against one another too; if one decides to build their own line, the other is probably going to catch up a lot faster and maybe get ahead of the game by buying Streamline.

So I don’t get it? Why the concern? I don’t understand why MD would suddenly turn into some huge competitive juggernaut when I see no evidence of the sort? They have a similar product but that was the same thing last year and the year before and it seems like both companies couldn’t sell much in the past (judging from their revenue). Is it just that if Streamline is having momentum then MD must too? Given the background that led to this surge, I’m not sure why that would be the case?

I hope you don’t mind my ignorance on the other point about MD. Haven’t done a lot of in depth research, and I agree that if they employ 2-10 staff, they likely don;t have what it takes to penetrate.

I found these websites,which seems to suggest they have direct connection to the sewer just like streamline. This raised my questions about the strength of the patents in the first place, and caused the initial worry about a ‘similar’ product already on the market for years.

In the 10K it says all competitors have products with a connection to the sewer system.

In the 10K this is what it says about MDs product:

We believe that this continuous operation and unlimited capacity feature provides us with a significant competitive advantage, particularly on large fluid generating procedures. All competing products, except certain models of MD Technologies, have a finite fluid collection capacity necessitating that the device be emptied when capacity is reached during the surgical procedure. In the case of MD Technologies while some of their models may have an unlimited capacity their process is not continuous because it requires switching the vacuum containers when one becomes full. For example, when the first container becomes full, the vacuum is switched over to a second container to collect the fluid in the second container while the fluid in the first container is drained. When the second container becomes full, the vacuum is again switched back to the first container to collect fluid while the second container is drained, and so on. Even though the switching of the vacuum between containers is automated in certain MD Technology models, the automated switching results in brief interruptions or reductions in suction during the surgical procedure.

I can imagine that surgeons prefer the Streamway system then. I certainly see potential here, and I might ask some questions on the next call. Would be mostly interested to hear how much of their projected sales volumes is based on discussions with existing clients vs extrapolations of recent sales to new customers.

Its not that one is better than the other but it provides more insight in upside. If most of these 100 unit sales are based on expectations rooted in sales to new customers in Q4/Q1 it shows that their sales organization is performing better and might be gaining traction. However, such sales have a higher degree of uncertainty imo than potential sales to existing customers (who supposedly are already happy with the system).

Those are good points. To me, the story is about the sales number they released. There are plenty of holes you can poke in the product and why it should or shouldn’t ramp, ie. the larger incumbants with more promotion, reluctance of hospitals to poke holes in wall during installation, whether the final product is worth the trouble of tossing the cart you are using and replacing it, etc. Those are all potentially valid points and I don’t know any more then anyone else. But when a company releases a projection like this I tend to believe it, so until they prove otherwise I’m willing to play this out and see what this year and next year bring.